It is important to be aware if the intermediary you are dealing with for financial/investment advice is licensed to provide this service

Before onboarding new clients, it is customary at Samasthiti Advisors to have a call with them to understand their requirements. There are several common threads across these interactions, but the one conversation that always comes as a surprise to us is how little prospective clients know about the intermediary they have been dealing with for their investment requirements. While most clients believe that they have worked with a financial adviser or investment adviser in the past, that’s usually not the case! Through this post, we intend to clearly explain how one can identify whether their current advisor is licensed and regulated or not.

Investors receive financial advice from diverse sources. Apart from friends and relatives, advice is received from tax consultants, mutual fund distributors, insurance distributors, bank relationship managers, amongst others.

It is important to keep in mind that none of the above counterparties are licensed to provide comprehensive financial planning or investment advisory services.

Tax consultants are experts in matters relating to tax. Mutual fund distributors are permitted to provide only incidental advice about mutual funds. Similarly, insurance distributors are permitted to provide advice about insurance. The same applies to your bank relationship manager – they are permitted to only provide incidental advice about the product they are selling.

Why is it that only RIAs are permitted to provide comprehensive investment advice?

This is because RIAs are prohibited from taking commissions from manufacturers of financial products. So, for instance, if an RIA advises a client to invest in a mutual fund, they cannot take any commission from the mutual fund company for recommending their product. This ensures that the advice provided by the RIA remains unbiased and hence they are licensed to provide full and comprehensive financial planning/investment advisory services to investors.

How to check if your financial adviser is a Registered Investment Adviser (RIA)?

Of late, Stock Exchanges and Depositories have been sending mass email warning investors to check the registration status of their financial advisers. For instance, given below is such an email sent by the National Stock Exchange (NSE), which is India’s largest stock exchange.

Reproducing the link below for your reference where you can easily check if the intermediary you are dealing with for your investments is a Registered Investment Adviser (RIA) with India’s capital markets regulator – Securities and Exchange Board of India (SEBI).

https://www.sebi.gov.in/sebiweb/other/OtherAction.do?doRecognisedFpi=yes&intmId=13

So, don’t blindly believe the words of the intermediary you are dealing with, and check for yourself their registration details before it’s too late!

Our RIA registration details have been provided below for your easy reference,